ETF Special Report

What You Need to Know About Sector ETFs

ETF Special Report: By selecting sector funds, investors smooth out returns and get more aggressive.

MANY INVESTORS TAKE the rifle-shot approach to portfolio strategy: Their goal is to hit just the winners. But with the proliferation of exchange-traded funds, an increasing number are opting for the shotgun approach. Their aim is to buy whole sectors of the market via ETFs.

Of today's 760 ETFs, there are 140 covering domestic industries -- which can range from the nine broad categories that Standard & Poor's uses to much narrower niches -- like the B2B Internet HOLDRs (ticker: BHH) fund, with just two stocks. Some $30...